ESMA Guidelines on the Conditions and Criteria for the Qualification of Crypto-Assets as Financial Instruments

The Guidelines apply to competent authorities, financial market participants, and any individual or entity engaged in crypto-asset activities. They seek to clarify how Article 2(5) of MiCA should be applied when determining whether a crypto-asset qualifies as a financial instrument. They come into force sixty days after their publication in all official EU languages on ESMA’s website, happened on March 19, 2025.

Legislative References, Abbreviations, and Definitions

Underpinning these Guidelines are several core pieces of legislation. The most central of these are MiFID II (Directive 2014/65/EU), AIFMD (Directive 2011/61/EU), MiCA (Regulation (EU) 2023/1114), UCITSD (Directive 2009/65/EC), the Money Market Fund Regulation (2017/1131/EU), and the ESMA Regulation (Regulation (EU) 1095/2010). They also make reference to DLTR (Regulation (EU) 2022/858), which governs pilot regimes for distributed ledger technology.Relevant abbreviations include AIF for Alternative Investment Fund, ART for Asset-Referenced Token, CASP for Crypto-Asset Service Provider, DLT for Distributed Ledger Technology, EMT for Electronic Money Token, and NFT for Non-Fungible Token.

Classification of Crypto-Assets as Transferable Securities (Guideline 2)

To determine whether a crypto-asset qualifies as a transferable security, it is important to verify whether the crypto-asset grants rights equivalent to those attached to shares, bonds, or other forms of securitised debt. The text of MiFID II (Article 4(1)(44)) underpins this assessment. According to the Guidelines, three main criteria must be cumulatively fulfilled. First, a crypto-asset must not be an instrument of payment, so if its sole use is as a medium of exchange, it would not qualify as a transferable security. Second, the crypto-asset must belong to a “class” of securities, meaning that it confers the same rights and obligations to all holders or else belongs to a distinct class within the issuance. Third, it must be “negotiable on the capital market,” which generally means that it can be freely transferred or traded, including on trading platforms equivalent to those covered by MiFID. If all these points are satisfied, then the crypto-asset should be classified as a transferable security and treated under the same rules that govern traditional instruments.

Classification as Other Types of Financial Instruments

Money-Market Instruments (Guideline 3)

A crypto-asset that would be considered a money-market instrument must normally be traded on the money market and should not serve merely as an instrument of payment. The crypto-asset should exhibit features akin to short-term negotiable debt obligations, such as treasury bills or commercial paper, and typically have a short maturity or a fixed redemption date. An example might be a token representing a certificate of credit balance repayable within a short timeframe, though it must be clearly distinguishable from mere payment tools.

Units in Collective Investment Undertakings (Guideline 4)

A crypto-asset qualifies as a unit or share in a collective investment undertaking if it involves pooling capital from multiple investors, follows a predefined investment policy managed by a third party, and pursues a pooled return for the benefit of those investors. The focus is on whether participants lack day-to-day discretion over how the capital is managed and whether the project is not purely commercial or industrial in purpose. An example would be a token representing ownership in a fund-like structure that invests in a portfolio of other digital or traditional assets; if it meets the criteria from existing definitions in AIFMD and UCITSD (excluding pure payment or operational tools), it may be deemed a collective investment undertaking.

Derivative Contracts (Guideline 5)

The Guidelines recognize two broad scenarios for derivatives: crypto-assets can serve as the underlying asset for a derivative contract, or they can themselves be structured as derivative contracts. In both cases, reference must be made to Annex I Section C (4)-(10) of MiFID II, which identifies features such as a future commitment (forward, option, swap, or similar) and a value derived from an external reference point, such as a commodity price, interest rate, or another crypto-asset. Whether the derivative settles in fiat or crypto is not decisive if the essential characteristics of a derivative are present. This includes perpetual futures or synthetic tokens that track an index or basket of assets, provided they fit into one of MiFID II’s derivative categories.

Emission Allowances (Guideline 6)

A crypto-asset may be considered an emission allowance if it represents a right to emit a set amount of greenhouse gases recognized under the EU Emissions Trading Scheme, in line with Directive 2003/87/EC. If the token is interchangeable with official allowances and can be used to meet compliance obligations, it should then be regulated under MiFID II as an emission allowance. On the other hand, self-declared carbon credits or voluntary offsets that are not recognized by EU authorities do not fall under this category.

Background on the Notion of Crypto-Assets

Classification as Crypto-Assets (Guideline 7)

The Guidelines reiterate that a crypto-asset, in general, is a digital representation of value or rights, transferred and stored via DLT. If it cannot be transferred beyond the issuer or if it is purely an instrument of payment, it typically falls outside the scope of these financial-instrument rules. Moreover, the fact that a holder anticipates profit from a token’s appreciation is not by itself sufficient to qualify the token as a financial instrument.

Crypto-Assets That Are Unique and Non-Fungible (NFTs) (Guideline 8)

Non-fungible tokens, which are unique and not interchangeable with each other, are excluded from MiCA provided they genuinely fulfill the requirement of uniqueness. This means having distinctive characteristics or rights that cannot be matched by any other asset in the same issuance. Merely assigning a unique technical identifier to each token is not enough to establish non-fungibility if the tokens effectively grant identical rights and are indistinguishable in economic reality. Fractionalizing an NFT into multiple tradable pieces typically renders those fractional parts non-unique unless each part has distinct attributes of its own.

Hybrid Crypto-Assets (Guideline 9)

Some tokens combine features typical of multiple crypto-asset categories, such as partial investment features (like profit participation) alongside a utility function (like access to a digital service). If, on closer assessment, any component of the token fits the definition of a financial instrument under MiFID II, the financial instrument classification applies, taking precedence over other labels. The Guidelines thus underline that hybrid tokens must be evaluated under a substance-over-form approach, with a focus on their actual rights, obligations, and economic features rather than how the issuer labels them.

Conclusion

Taken as a whole, the Guidelines demonstrate ESMA’s intention to ensure that all tokens conferring rights equivalent to conventional financial instruments are appropriately supervised under MiFID II. Although labels such as “utility” or “NFT” may be used by issuers, the ultimate question is whether the token’s real-world function and associated rights align with those of a security, a derivative, or another regulated category. By following this approach, authorities and market participants can maintain consistent, technology-neutral regulation in the fast-evolving crypto-asset space.

---

Prokopiev Law Group stays at the forefront of Web3 compliance and regulatory intelligence, offering strategic support across NFT legal solutions, DAO governance, DeFi compliance, token issuance, crypto KYC, and smart contract audits. Leveraging a broad global network of partners, we ensure your project meets evolving regulations worldwide, including in the EU, US, Singapore, Switzerland, and the UK. If you want tailored guidance to protect your interests and remain future-proof, write to us for more information.

Reference: Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments The information provided is not legal, tax, investment, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. Some parts of the text may be automatically generated. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information.